By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president fears some new car dealerships will close next year if the current 30 per cent year-over-year industry sales decline persists.

Confirming that the industry’s worst post-Value Added Tax (VAT) fears had been realised, Fred Albury told Tribune Business that it was in “a no-win situation all around for the time being”.

With some dealerships selling as little as four new vehicles per month, Mr Albury said it was impossible for them to cover costs that ran as high as $200,000 per month.

While the 30 per cent drop in new car sales for the 2015 first half had been anticipated, and was in line with the experience of other Caribbean nations post-VAT, Mr Albury said there was nothing to indicate the previously hoped for pick-up during the year’s final six months would materialise.

He added that the Baha Mar impasse had exacerbated “an air of negative consumer confidence”, further depressing demand for new autos.

“We anticipated it for the first half,” Mr Albury said of the sales decline, “but were hoping it was going to improve in the second half.

“It doesn’t look like that’s going to happen, from where I sit and what I see. I think we’re in for a very rough ride, and if it goes beyond 2015 I wouldn’t be surprised to see some places close up shop and call it a day.

“When a new car dealer sells four cars a month, there’s no way you can survive.”

Emphasising that he was not referring to his own Auto Mall business, Mr Albury revealed that just one of his dealerships typically incurred monthly expenses of $200,000.

“Parts and service covers 50 per cent of that, and 50 per cent has to be covered by sales,” he added. “If sales are not there; it hardly helps.”

The BMDA chief joked about “going back to my roots to sell used cars”, where he would only need a staff of five compared to the current 80, to illustrate where the pressures on the new auto industry would lead.

He did, though, praise the Government’s recent moves to aid the sector via the change in the bases used for calculating Excise Tax, which had sometimes “reduced” prices or ensured they remained neutral post-VAT.

Mr Albury also backed the decision to standardise auto industry tax rates at the uniform, lower 65 per cent. This, though, had left dealers holding inventory at the previous, higher 75 per cent and 85 per cent rates.

“We have inventory that we paid the prior duty rates on, and consumers expect to get them at 65 per cent,” he explained. “We’re having to discount on those duty rates.”

With dealers having to ‘eat’ the portion of Excise Taxes above 65 per cent, Mr Albury said the Government’s policy adjustments had done little to stimulate consumer demand for autos post-VAT.

“They’ve locked up their wallets and gone away,” the BMDA chief told Tribune Business of consumers. “I anticipate sales [for the next six months] will be about the same as what we had for the first half.

“I don’t see anything encouraging out there that will drive a pick-up. It’s very lean. I’ve got people due for retirement, and I will have to let them retire. I would like to hold on to them for a year or two more, but I need to cut my numbers to pay the bills.

“There’s no consumer confidence out there at the moment. While we have a little bit of fat left from the good years, since 2008 we’ve lost a lot, and the fat is getting a little bit lean.”

Rick Lowe, Nassau Motor Company’s (NMC) director/operations manager, agreed with Mr Albury that consumer confidence was “blown” and “shot”.

While one of NMC’s auto brands had increased its market share during the 2015 first half, the other was down as were total sales volumes.

“It’s difficult, and when you have the Government taxing you through the wazoo because of its fiscal issues, it makes life very hard,” Mr Lowe told Tribune Business.

“There’s a lot of worry. If they keep implementing policies that tie the hands of reasonable business practices, where does it end?

“We’re entering the worst months of the business cycle, and then people’s confidence is blown, shot. They’re not going to invest, not going to buy. They’re going to hold off. There’s a lot of things to put out thinking caps on over.”

Mr Lowe added that potential auto buyers continued to encounter difficulties in meeting the banks’ stricter qualifying criteria for loans, which acted as a further impediment to increased sales.

“With slowing sales, everyone has inventory coming out of their ears, so there’s a carrying cost involved,” he told Tribune Business. “We kind of knew that all it would take was another shock [to the economy], and Baha Mar seems to be that shock.”

Mr Albury said his dealerships were focusing on corporate fleet and government vehicle sales, which were accounting for a significant percentage of current business. Commercial vehicle sales, too, were holding steady.

“The retail consumers are just not there, and we’re having to discount so heavily to create cash flow to pay bills to our suppliers,” he told Tribune Business.

“It’s a no-win situation all around for the time being. We’ve got to eat it somewhat. It’s a fact of life. It is what it is, and it will either make of break you.

“Maybe it’s getting time for me to retire,” Mr Albury laughed. “That’s the bleak picture with the new car auto industry at the moment. We do remain hopeful, but in the short-term that’s the picture.”